Question

Ayala Corporation accumulates the following data relative to jobs started and finished during the month of June 2020.

Costs and Production Data

                                                                Actual

Standard

Raw materials unit cost                 $2.00                     $1.80

Raw materials units                         11,200                   10,800

Direct labor payroll                          $177,310              $170,240

Direct labor hours                            14,900                   15,200

Manufacturing overhead incurred                            $225,608                             

Manufacturing overhead applied                                                              $228,608

Machine hours expected to be used at normal capacity                   41,500

Budgeted fixed overhead for June                                                            $62,250

Variable overhead rate per machine hour                                              $3.20

Fixed overhead rate per machine hour                                                   $1.50

Overhead is applied on the basis of standard machine hours. 3.20 hours of machine time are required for each direct labor hour. The jobs were sold for $500,000. Selling and administrative expenses were $41,400. Assume that the amount of raw materials purchased equaled the amount used.

               

(a)

Compute all of the variances for (1) direct materials and (2) direct labor. (Round per unit values to 2 decimal places, e.g. 52.75 and final answers to 0 decimal places, e.g. 52.)

1. Total materials variance                $

2. Materials price variance                   $

3. Materials quantity variance                    $

2. Total labor variance                        $

Labor price variance                      $

Labor quantity variance                $

Answer 1

a)

Direct materials:
Price variance	2,160.0	Favorable
Quantity variance	800	Favorable
Total Material Variance	2,960.0	Favorable
Direct labor:
Price variance	10,640	Favorable
Quantity variance	3,570	Unfavorable
Total Labor Variance	7,070	Favorable

Calculation of Direct material price variance:
Direct Material Price Variance= = ( SP -AP ) * AQ
= ( $ 2.00 - $ 1.80 ) * 10,800.
= $ 2,160 Favorable
Thus, Direct Material Price Variance is $ 2,160 Favorable
Calculation of Direct Material Quantity Variance is as follows:
Direct Material Quantity Variance = ( SQ - AQ ) * SP
= ( 11,200 - 10,800 ) * $ 2.00
= $ 800 Favorable
Thus, Direct Material Quantity Variance is $ 800 Favorable
Calculation of Direct Material Cost Variance is as follows:
Direct Material Cost Variance = Standard Cost - Actual cost
= ( SQ * SP ) - ( AQ * AP )
= ( 11,200 * $ 2.00 ) - ( 10,800 * $ 1.80 )
= $ 22,400 - $ 19,440
= $ 2,960 Favorable
Thus, Direct Material Cost Variance is $ 2,960 Favorable
Calculation of Direct labor price variance is as follows:
Direct Labor price variance = ( SR - AR ) * AH
= ( $ 11.90 - $ 11.20 ) * 15,200
= $ 10,640 Favorable
Therefore, Direct labor price variance $ 10,640 Favorable
Working note:
SR = Standard Labor cost / Standard labor hours
= $ 177,310 / 14,900
= $ 11.90
AR = Acutal labor cost/ Acutal labor hours
= $ 170,240 / 15,200
= $ 11.20
Calculation of Direct labor quantity variance is as follows:
Direct Labor Quantity variance = ( SH - AH ) * SR
= ( 14,900 - 15,200 ) * $ 11.90
= $ 3,570 Unfavorable
Thus, Direct Labor quantity variance is $ 3,570 Unfavorable
Calculation of Direct labor cost variance is as follows:
Direct Labor cost variance = Standard cost - Actual cost
= $ 177,310 - $ 170,240
= $ 7,070
Thus, Direct Labor efficiency variance is $ 7,070 Favorable
Where,
AH =	Actual labor hours
SH =	Standard labor hours
AR =	Actual labor rate per hour
SR =	Standard labor rate per hour
SQ =	Standard Quantity of Material
AQ =	Actual Quantity of Material
SP =	Standard Price of per material
AP =	Actual Price of per material